One of the emerging markets, Vietnam’s economy is seeing a rapid sustained rise. In the last two decades it has coursed a growth average of nearly 6% per year per person, jumping from being one of the poorest countries to the middle income bracket. Offering lower-cost production hubs with relatively younger workforce Vietnam has emerged as the new favourite substitute to India and China. It’s hardly a surprise then that demand for energy at home should grow by 10% annually.

Last November after years of mulling over costs, feasibility, foreign collaboration and safety issues Vietnam pulled away from nuclear power. The two proposed nuclear reactors would have added 40000MW to the national grid but the estimated price tag of $27 billion was too large to afford for a country whose government debt is now touching 65% of the GDP.

So how do you expand your energy generation capacity without burning a hole in your budget? Well, in this case, Vietnam has turned back to what it already had – coal. Free and plenty of it. Except, there are long term irreversible costs to choosing the most affordable fossil fuel. Unfortunately, the collateral damage has already begun.

According to estimates by Vietnam’s national utility, the country’s annual power consumption is about 162 billion kWh. Currently, Vietnam has up to 20 coal-fired plants and plans to increase their number to 32 by 2020 and to 51 by 2030. This means by 2020 the country’s coal plants would be producing 49% of its electricity output by burning 63 million tonnes of coal. This would further go up to 129 million tonnes of coal by the time it has all its 51 plants in operation. Its National Power Development Masterplan for 2011-20 has already made it clear that thermal power would be the mainstay of its energy mix.

The upcoming projects have signalled a new spate of business opportunities in Vietnam’s power sector, with contenders from Japan, China, Russia and Malaysia hoping to land the largest share of the pie. Work on Vung Ang No.2, a
Mitsubishi Corp. project in Ha Tinh Province with 1200-megawatt capacity, is already underway. The company has plans to build another plant in Binh Thuan province.
Sumitomo Corp. and
Marubeni are constructing one each in Hai Phong, Vietnam’s third largest city, and Tra Vinh province, respectively.

Unfortunately, for Vietnam it’s a double edged sword. Supporting the shift towards coal Vietnam Energy Association had recently claimed that after turning down nuclear energy the country had no other choice but to rely on fossil fuels. Even though building new coal plants can help the country phase out old inefficient and higher polluting coal plants while also meeting domestic energy demands at an affordable cost, experts believe it’s not the only alternative. World Bank’s Energy Evaluation in Asia program has already identified a great potential in harnessing wind energy in Vietnam’s south central regions and Mekong Delta, adding an estimated 513 MW. Equally, solar energy also holds great promise to turn things around in the country with up to 2500 hours of yearly sunshine. A report from Duanne Morris consultancy underlines the case for adopting the cheaper and cleaner natural gas over coal for a greener energy mix. The consultancy argues that Vietnam is more likely to find financing for renewable energy sector than for coal-fired one.

It’s critical for Vietnam to rethink its energy mix before it is too late. The effects of climate change are manifesting themselves in the tiny country. For Vietnam, 2016 was an exceptionally dry year. Brought on by El Nino effect, the water levels in rivers and underground tables sunk to a new low in 90 years. And saline water from the sea pushing up through Mekong river delta channels decimated agricultural production in several provinces. The drought significantly affected Vietnam’s coffee, rice and sugar crops, resulting in lower yields.

Now a new report, put together by Harvard University and Greenpeace, released earlier this month has highlighted the disastrous impact of coal emissions in Southeast Asia by 2030. The impact of coal planned coal power expansion will result in a 300% rise in emissions in the next decade, causing even a higher number of people to die from pollution-related diseases, the report says. Vietnam and Indonesia would be the worst affected in the region as premature mortality rates shoot up due to increased emissions, the report warns.

Vietnam needs to decide whether turning to coal today to meet tomorrow’s energy needs really is economical in the long run.